Fully Diluted vs. Treasury Method in a private company
Hi there -
I understand how we compute the fully diluted vs. treasury method price per share for a public company (assuming repurchase of shares with the proceeds of the exercice of vested and in-the-money options).
However, in the context of a private company, how would that work? See an example below.
EBITDA = $10m
Multiple = 10x
Enterprise Value = $100m
Net Debt = $50m
Equity Value = $50m
Shares outstanding = 100
Options vested and outstanding = 20
Strike Price = $250,000
So let's assume the company is being sold to an investor for $50,000,000. What would the the proceeds paid to the shareholders and the ones coming from the exercice of the options?
My first guess is the following:
The Company will receive proceeds for the exercise of the strike : 20 * $250,000 = $5,000,000
The total number of shares will grow from 100 to 120
The price per share is therefore = ($50,000,000 + $5,000,000) / (100+20) = $458,333
Shareholders will hence receive = 100 shares * $458,333 = $45,833,333
Option holders will receive = 20 options (now shares) * $458,333 = $9,166,667 minus the strike of $5,000,000, i.e. $4,166,667
Do you think the above maths are correct? Treasury Method Price per share would be $458,333?
Thanks !!
Quis dolores sed quaerat saepe libero tempore. Eveniet et praesentium sed nostrum. Quam nesciunt hic aut consequatur magnam.
Qui assumenda quibusdam occaecati mollitia. Veniam aut tenetur iusto et in dicta velit. Laborum dolorem doloribus odit quasi aliquid in.
In voluptates exercitationem animi quidem architecto. Veniam molestiae mollitia consectetur sapiente unde eum. Vero tempora minima et omnis optio eos error eos. Veritatis corrupti doloremque sunt possimus odit.
Nihil id omnis soluta id itaque nam. Corporis ratione sequi facilis quae odio quasi quia ut. Enim quas necessitatibus aut. Nostrum provident qui blanditiis aut.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...